Netflix founder Reed Hastings dramatically quit as co-CEO on Thursday — taking the helm after adding more than 7 million new subscribers with its lower-cost ad-supported tier.
Hastings, who spearheaded Hollywood’s steamy first revolution, is stepping up as chairman while COO Greg Peters takes the reins alongside co-CEO Ted Sarandos.
Peters, who steered the move from DVDs to streaming, was reportedly groomed for the role by Hastings and has been handed increasing power in recent years.
In a statement, Hastings, 62, said: “I’m so proud of our first 25 years and so excited about our next quarter century. There is so much more we can do to better entertain the world and bring more joy to our members.”
The announcement came as Netflix announced that it added a whopping 7.66 million new subscribers in the fourth quarter of 2022 after rolling out its cheaper ad-supported membership tier.
Netflix Co-CEO Reed Hastings attends the Milken Institute Global Conference on October 18, 2021 in Beverly Hills, California
Graph showing Netflix’s quarterly revenue from 2011 to 2022
The streaming giant previously warned investors that it expected to add just 4.5 million subscribers in the fourth quarter – the lowest gain for the holiday season since 2014.
The forecast caused the share price to fall sharply in after-hours trading ahead of Thursday’s report.
Revenue reached $7.85 million in the fourth quarter and is expected to grow by $8.17 million in the first quarter of this year.
In the US and Canada, Netflix added 910,000 subscribers, while the biggest growth sector for the quarter was Europe, the Middle East and Africa, with 3.2 million additions.
Hastings founded Netflix in 1997 with Marc Randolph. Randolph served as Netflix’s CEO for its early years before Hastings took over as CEO.
He took the company public in 2002 and fought video rental chain Blockbuster for control of the sector by offering a pioneering DVD-to-mail service.
In 2007, Hastings launched a separate streaming service called Qwikster. At first, it proved a flop — the company lost 800,000 customers and its shares plummeted 70 percent.
But the idea for on-demand internet streaming would prove to be a permanent one.
That same year, Sarandos – a film and television fanatic – decided to spend $100 million on a show called House of Cards.
The series, starring Kevin Spacey, became a smash hit and changed the course of Netflix by showing studios and executives that streaming was the future.
In Thursday’s announcement, Hastings said he has been increasingly delegating management to Peters and Sarandos for more than two years. Sarandos was appointed Co-CEO in July 2020.
“In light of COVID and the recent challenges in our business, it’s been a baptism of fire,” Hastings wrote.
“But they’ve both done incredibly well, ensuring Netflix has continued to improve and develop a clear path to accelerate our revenue and earnings growth again. Therefore, the board and I believe it is the right time to complete my succession,” he added.
Insiders said Hastings has put Peters in charge of the company’s top priorities in recent years: launching the advertising tier, gaming and cracking down on password sharing.
Harry & Meghan was viewed more globally than any other Netflix documentary in its premiere week
Edward Norton as Miles, Madelyn Cline as Whiskey and Daniel Craig as Detective Benoit Blanc. in Glass Onion: A Knives Out Mystery (2022)
“Reed has been grooming Greg for this job for years,” Lightshed analyst Rich Greenfield told The Hollywood Reporter.
“It’s the combination of a product person and engineer in Greg with a content person in Ted. Netflix is the marriage of content and technology, and it’s important to convey that.
“That’s Reed’s realization that Netflix is more than Reed Hastings, which is admirable for a sector that has consistently allowed ego to get in the way of succession.”
Netflix is under pressure from restrained consumer spending and competition from Walt Disney Co, Amazon.com Inc, and others who spend billions of dollars to produce TV shows and films for online audiences.
In the first half of 2022, Netflix shocked Wall Street by losing customers. The company returned to growth in the second half of the year.
To spur growth, Netflix rolled out a cheaper, ad-supported option in 12 countries last November. It has also announced plans to crack down on password sharing.
The company’s global subscriber base reached 231 million at the end of December.
Audiences flocked to Addams’ family tale Wednesday, the third-most-watched series in Netflix history, the company said. Crime film Glass Onion and British royals documentary Harry & Meghan were also hits during the quarter.
Net income fell to $55 million, or 12 cents a share, from $607 million, or $1.33 a share, a year earlier. Revenue rose 1.9%, as expected, to $7.85 billion.
Bela Bajaria, head of global television at Netflix, has been appointed chief content officer.
Hastings said he plans to work with Sarandos and Hastings as executive chairman “for many years to come”.